51% attack: A condition in which more than half the computing power on a cryptocurrency network is controlled by a single miner or group of miners. That amount of power theoretically makes them the authority on the network. This means that every client on the network believes the attacker’s hashed transaction block. This gives them control over the network, including the power to:

Issue a transaction that conflicts with someone else’s.

Stop someone else’s transaction from being confirmed.

Spend the same coins multiple times.

Prevent other miners from mining valid blocks.

Address: A bitcoin address is used to receive and send transactions on the bitcoin network. It contains a string of alphanumeric characters, but can also be represented as a scannable QR code. A bitcoin address is also the public key in the pair of keys used by bitcoin holders to digitally sign transactions (see Public key).

Altcoin: The collective name for cryptocurrencies offered as alternatives to bitcoin. An altcoin means “alternate coin” – which commonly means any cryptocoin or cryptoledger that is not Bitcoin. Sometimes an altcoin is an exact replica of the Bitcoin codebase: in other instances, it is drastically modified.

AML: Anti-Money Laundering techniques are used to stop people converting illegally obtained funds, to appear as though they have been earned legally. AML mechanisms can be legal or technical in nature. Regulators frequently apply AML techniques to bitcoin exchanges.Bitlicence:

Application programming interface (API) – An application programming interface (API) is a set of requirements that governs how one software application can talk to another. APIs are not new: they are the basis of what allows you to move data between software applications. (ReadWrite.com)

Asset registries – a method used in accounting to track assets of an individual or organization.

Big data – refers to both the information that companies hold, as well as the activity logs that take place on their systems.

Big data analytics – the analysis of big data (also includes solving problems associated with analysing the data, much of which can be unstructured).

Bitlicence: New rules that require certain providers of virtual currency services operating in New York state – in particular, those with custody of customers’ funds and which exchange virtual currencies for dollars and other fiat currencies – to apply for a specially tailored Department of Financial Services (DFS) license. The regulation lays out a variety of specific conditions to keep that license up to date with regard to protections of consumers and anti-money-laundering compliance, capital adequacy, changes of ownership and cybersecurity. The BitLicense is expected to become a template for other state financial regulators to follow.

Blockchain – a permissionless or permissioned distributed ledger with applications such as a digital currencies database, asset registries, identity management, smart contracts, digital value exchange etc. There can be public and private blockchains with interlinking chains connecting the various platforms. Full blockchains, which are usually sequential, and contain every entry, addition or transaction ever completed.

Bitcoin (BTC): When spelled with an uppercase “B” Bitcoin refers to a peer-to-peer network, open-source software, decentralized accounting ledger, software development platform, computing infrastructure, transaction platform and financial services marketplace. When spelled with a lowercase “b” bitcoin (or “l” for litecoin) is a digital cryptocurrency and unit of account. The acronym “BTC” is often used to represent a bitcoin.

Client: A software program running on a desktop or laptop computer, or mobile device. It connects to the bitcoin network and forwards transactions. It may also include a bitcoin wallet (see node).

Confirmation: The act of hashing a bitcoin transaction successfully into a transaction block, and cementing its validity. A single confirmation will take around 10 minutes, which is the average length of time for a transaction block to be hashed. However, some more sensitive or larger transactions may require multiple confirmations, meaning that more blocks must be hashed and added to the blockchain after the transaction’s block has been hashed. Each time another block is added to the blockchain after the transaction’s block, the transaction is confirmed again.

Colored coins: A proposed add-on function for bitcoin that would enable bitcoin users to give them additional attributes. These attributes could be user-defined, enabling you to mark a bitcoin as a share of stock, or a physical asset. This would enable bitcoins to be traded as tokens for other property.

A consensus mechanism is the process in which a majority (or in some cases all) of network validators come to agreement on the state of a ledger. It is a set of rules and procedures that allows maintaining coherent set of facts between multiple participating nodes. In the case of Bitcoin, the “longest chain” – the chain with the most proof-of-work – is considered to be the valid ledger. There are multiple alternative consensus mechanisms which have been developed over the past three decades. (Tim Swanson)

CPU: Central Processing Unit – the ‘brain’ of a computer. In the early days, these were used to hash bitcoin transactions, but are now no longer powerful enough. They are still sometimes used to hash transactions for altcoins.

Cryptography: The use of mathematics to create codes and ciphers that can be used to conceal information. Used as the basis for the mathematical problems used to verify and secure bitcoin transactions.

Cryptocurrency: Cryptocurrency is a type of digital currency that uses encryption for security and anti-counterfeiting measures. Public and private encryption keys are often used to transfer cryptocurrency between individuals. Bitcoin is the leading functioning example of a cryptocurrency. (Source: Techopedia.com)

Crypto is a word root that comes from the Greek for “hidden” or to hide;” for example, cryptography is the process of coding written messages. Cryptocurrency is a form of currency based on mathematics alone. Instead of fiat currency, which is printed, cryptocurrency is produced by solving mathematical problems based on cryptography. This takes the form of long blocks of alphanumeric code, and this alternative currency is traded between investors and used as a form of payment for goods and services to merchants who accept it.

Unlike traditional bill-and-coin currency such as the US dollar, cryptocurrency is not directly tied in to any government, corporation or bank, and is therefore not susceptible to inflation, regulations or charges and fees that affect traditional legal tender. Cryptocurrencies are relatively new; the first to be publicly introduced was Bitcoin in 2009. Cryptocurrency is also known by the terms “digital currency” and “alternative currency.”

A cryptocurrency system is a network that utilizes cryptography to secure transactions in a verifiable database that cannot be changed without being noticed. For the purposes of this report, a cryptocurrency system assumes that transactions are transmitted in a peer-to-peer fashion. Traditionally one way to undermine a peer-to-peer network is by creating large amounts of pseudonymous identities in order to gain a disproportional amount of influence (or votes). This is called a Sybil attack.

Bitcoin was purposefully designed to make it expensive to attack the network in this manner. It establishes an ordering for transactions through a ‘proof-of-work’ process – a capital-intensive Sybil protection mechanism, which makes it costly for an attacker seeking retrospectively to impose a new transaction ordering, which could enable them to double-spend transactions. Bitcoin includes a native token (a currency application) to fund network security. Bitcoin is the first public, decentralized cryptocurrency system that used this validation method. A proposed alternative to proof-of-work, dubbed ‘proof-of-stake’ is sometimes used in cryptocurrency systems.

Contactless payment systems – the use of radio-frequency identification for making secure payments, such as debit cards, key fobs and smart cards.

Crowdfunding is a method of raising capital in small amounts from a large group of people using the Internet and social media. Unlike funds from venture capitalists or angel investors, the money raised through crowdfunding does not provide an equity stake, but often includes early buy-in incentives. This is quite distinct from crowd investing (also called equity crowdfunding), which allows direct investment in the Exempt Market. (Source: Techopedia.com)

Data aggregation is a type of data and information mining process where data is searched, gathered and presented in a report-based, summarized format to achieve specific business objectives or processes and/or conduct human analysis. (Source:Techopedia.com)

Data lakes – data storage systems that contain data stored in its ‘native’ format until it is required for use.

DDoS: A distributed denial of service attack uses large numbers of computers under an attacker’s control to drain the resources of a central target. They often send small amounts of network traffic across the Internet to tie up computing and bandwidth resources at the target, which prevents it from providing services to legitimate users. Bitcoin exchanges have sometimes been hit with DDoS attacks.

Day Trading: This is the practice of buying and/or selling a stock or commodity, with the beginning-to-end process of the trade taking place all within the same calendar day. Day traders look for small price shifts minute-to-minute, and do their best to maximize their profits (or at least minimize their losses) by making several transactions a day—but without leaving any business unfinished overnight. Day traders depend on “micro-trends,” which are minuscule shifts in market value, as compared to regular traders, who may observe the trends of a stock or commodity over several days, weeks or months before taking action.

Decentralized: This is a term you’ll hear often when cryptocurrency is being discussed. In this context, it means the currency isn’t issued or controlled by a centralized authority, such as a bank or government. While this means cryptocurrency isn’t directly affected by inflation or governmental regulations—which its advocates insist makes for a more level international playing field—it also means its investors carry more responsibility for its well-being. They should be aware of the risks inherent with cryptocurrency, such as value fluctuation and the lack of institutional protections against theft and fraud. There’s no FDIC for digital currency—as there is in the centralized US banking system—so once it’s stolen, it’s gone forever.

Decentralized autonomous organization (DAO), also known as a decentralized autonomous consensus platform (DACP), is a virtual entity that interfaces with a cryptoledger and performs a specific, preprogrammed task. In its simplest form it is merely an agent programmed to do a specific task like acting as a multisignature wallet that sits on the ledger waiting for outside instructions. In order to modify or fulfill its task, it must receive a certain threshold of digital signatures from keyholders (e.g., voters, shareholders) and perhaps with a 67% majority, have the right to release the entity’s funds and modify its code.

It can fulfill the functions of an organization, corporation, or agent by conducting operations such as payroll management, issuance of dividends, stock, or debt, or otherwise executing repetitive, mechanical, quantifiable actions from a cryptoledger.

Deflation: The reduction of prices in an economy over time. It happens when the supply of a good or service increases faster than the supply of money, or when the supply of money is finite, and decreases. This leads to more goods or services per unit of currency, meaning that less currency is needed to purchase them. This carries some downsides. When people expect prices to fall, it causes them to stop spending and hoard money, in the hope that their money will go further later. This can depress an economy.

Digital document provenance is the ability to prove a document existed at a specific point in time. Using an address derived from the cryptographic hash of a digital file, any bitcoin transaction to that address serves as a public timestamp.

A digital native is an individual who was born after the widespread adoption of digital technology. The term digital native doesn’t refer to a particular generation. Instead, it is a catch-all category for children who have grown up using technology like the Internet, computers and mobile devices. (Source: Techopedia.com)

A disaster recovery site is an alternative backup facility that is used when a primary location becomes unusable due to failure or disaster. It contains equipment and infrastructure that can be temporarily used to manage business processes until the main site’s functionality is fully restored. (Source: Techopedia.com)

Disintermediation – the elimination of intermediaries as banks and brokers in financial transactions.

Distributed systems – a type of computer network that allows linked autonomous computers to share the resources of the system hardware, software and data.

A distributed ledger system, is a network that fits into a new platform category. It typically utilizes cryptocurrency-inspired technology and perhaps even part of the Bitcoin or blockchain network itself, to verify or store votes (e.g., hashes). While some of the platforms use tokens, they are intended more as receipts and not necessarily as commodities or currencies in and of themselves. The Bitcoin blockchain is very commonly characterized as a distributed ledger, yet for the purposes of this report, distributed ledgers are those reliant on legal institutions and as such, a final commonality is the permissioned identity system.

Encryption is the most effective way to achieve data security. To read an encrypted file, you must have access to a secret key or password that enables you to decrypt it. Advanced Encryption Standard (AES) encryption is the current industry standard, which allows for up to 256-bit keys, providing a virtually unbreakable level of encryption using current technology. (Source: Webopedia.com and Wikipedia.org)

Escrow: The act of holding funds or assets in a third-party account to protect them during an asynchronous transaction. If Bob wants to send money to Alice in exchange for a file, but they cannot conduct the exchange in person, then how can they trust each other to send the money and file to each other at the same time? Instead, Bob sends the money to Eve, a trusted party who holds the funds until Bob confirms that he has received the file from Alice. She then sends Alice the money.

Exchange: A central resource for exchanging different forms of money and other assets. Bitcoin exchanges are typically used to exchange the cryptocurrency for other, typically fiat, currencies.

E-wallet – an electronic device, such as a smartphone or computer, that allows individuals to make electronic transactions.

Fedcoin / Govcoin: A government-sponsored digital currency. Conceptually, the Fed (or any central government), as the core developer, could make available an open-source Bitcoin-like protocol (suitably modified) called Fedcoin. Essentially, Fedcoin (or Govcoin for any other country) would be just a digital denomination of the U.S. dollar but with lots of the advantages of bitcoin – low cost and peer-to-peer transactions to anyone in the world with the appropriate wallet software and access to the Internet.

Fiat currency: A currency, conjured out of thin air, which only has value because people say it does. Constantly under close scrutiny by regulators due to its known application in money laundering and terrorist activities. Not to be confused with bitcoin.

FinCEN: The Financial Crimes Enforcement Network, an agency within the US Treasury Department. FinCEN has thus far been the main organization to impose regulations on exchanges trading in bitcoin.

FINSERV: A contraction of the words ‘financial’ and ‘services’, #finserv is often used on Twitter as a hashtag to denote a topic related to the financial services industry.

Fintech/financial technologies – A contraction of the words ‘financial’ and ‘technology’, fintech has become a ubiquitous term for any technology applied to financial services, typically where a technology is sold into the financial services sector working for the back office functions of these customers. The hashtag #fintech is widely used on Twitter. (Source: NDRC)

It is commonly used to describe ‘innovation in financial services’, covering new products from start-ups, or the adoption of new approaches by existing players where technology is the key enabler. It spans many industries including banking, insurance, asset management and trading.

Gamification – the application of gaming to non-game problems, such as business or social impact settings.

Genesis block: The very first block in the block chain.

Governance: An organization’s governance “determines who can participate (in the decision-making), what roles they might
play, how they might interact and how disputes get resolved and a set of protocols or standards to facilitate
connection, coordination, and collaboration, It is through these governance processes that the principles, vision and mission of an organization are defined.

Grand challenges – challenges set to promote solutions to global problems, including scientific, mathematical, and health and development.

Gross domestic product (GDP) – the monetary value of all goods and services produced within a country in a specific time period, usually calculated annually.

Hackers use alternative methods to gain access to computer systems and networks, which may include technical or social methods. They may also work with networks of affiliates (or other computers co-opted by the hackers) to perform denial of service attacks, which are brute force attempts to overwhelm a company’s web portal with access requests, crippling it and preventing access by authorized users. Hacking actions are differentiated as illegal and unacceptable (black or grey hat hacking) or legal and acceptable (white hat hacking). (Source: Techopedia.com)

Hash: A mathematical process that takes a variable amount of data and produces a shorter, fixed-length output. A hashing function has two important characteristics. Firstly, it is mathematically difficult to work out what the original input was by looking at the output. Secondly, changing even the tiniest part of the input will produce an entirely different output.

Hash rate: The number of hashes that can be performed by a bitcoin miner in a given period of time (usually a second).

Haptic technologies – technology that uses the sense of touch to interface with the user, giving feedback.

Horizon scanning – the exploration of potential challenges, opportunities and likely future developments; can include topics such as ageing or climate change.

Incumbents – in business the term is used to denote the largest company or companies within a certain industry.

Inflation: When the value of money drops over time, causing prices for goods to increase. The result is a drop in purchasing power. Effects include less motivation to hoard money, and more motivation to spend it quickly while the prices of goods are still low.

Internet of Things – The Internet of Things (IoT) is a computing concept that describes a future where all or most everyday physical objects will be connected to the Internet and be able to identify themselves to other devices, for example, devices sending and receiving information about an individual’s environments and habits. Early stages of the IoT exist today in the form of TVs, blu-ray players, refrigerators, thermostats, fire detectors, and even cars that can interact with other devices. (Source: Techopedia.com)

Invoice trading/invoice financing – the online auction of invoices, usually by SMEs to gain access to tied up cash, and increase their working capital.

KYB: Know-Your-Business

KYC: Know Your Client/Customer rules force financial institutions to vet the people they are doing business with, ensuring that they are legitimate.

A “legal entity identifier” (LEI): A Legal Entity Identifier (LEI) is a unique ID associated with a single corporate entity. Although no common entity ID convention exists in the market today, a range of regulatory initiatives are driving the creation of universal LEI standard for financial markets.

Leverage: In foreign currency trading, leverage multiplies the real funds in your account by a given factor, enabling you to make trades that result in significant profit. By giving leverage to a trader, the trading exchange is effectively lending them money, in the hope that it will earn back more than it loaned in commission. Leverage is also known as a margin requirement.

Liquidity: The ability to buy and sell an asset easily, with pricing that stays roughly similar between trades. A suitably large community of buyers and sellers is important for liquidity. The result of an illiquid market is price volatility, and the inability to easily determine the value of an asset.

Machine learning/cognitive computing – computer systems that can learn from algorithms as opposed to simply being programmed to do certain tasks.

Merkle tree: Hash trees can be used to verify any kind of data stored, handled and transferred in and between computers. Currently the main use of hash trees is to make sure that data blocks received from other peers in a peer-to-peer network are received undamaged and unaltered, and even to check that the other peers do not lie and send fake blocks.

Microtransaction: Paying a tiny amount for an asset or service, primarily online. Micro-transactions are difficult to perform under conventional payment systems, because of the heavy commissions involved. It is difficult to pay two cents to read an online article using your credit card, for example.

A miner is a colloquial term for a node that originally both validated and selected transactions and consequently submitted “proof-of-work” to other nodes on the 4

network. This set of tasks has since been divorced over the past four years: whereas miners still validate and select transactions, hashing (or hashers) focus solely on solving the “mid-state” in a proof-of-work puzzle. That is to say, hashing machines are not miners, as they do not validate or select transactions to be placed into blocks. Other literature defines a miner as a Dynamic Membership Multi-Party Signature (DMMS).

A mining farm is an amalgamation of multiple hashing machines. Technically these should be called hashing farms but instead they are commonly referred to as mining farms. These farms can range from a hobbyist that owns a few machines at home to several thousand hashing systems located in a professionally managed data warehouse facility.

A mining pool is an entity that manages and operates a transaction processing node. In practice, multiple hashing farms typically submit their proof-of-work to the pool which then sends block headers back to the farms who then begin to generate values for the “puzzle.” This is a continuous, automated process.

MSB – Money Service Business: A money services business (MSB) is a legal term used by financial regulators to describe businesses that transmit or convert money. The definition was created to encompass more than just banks which normally provide these services to include non-bank financial institutions. (Wikipedia)

Multisig: Multi-signature addresses allow multiple parties to partially seed an address with a public key. When someone wants to spend some of the bitcoins, they need some of these people to sign their transaction in addition to themselves. The needed number of signatures is agreed at the start when people create the address. Services using multi-signature addresses have a much greater resistance to theft.

An on-chaintransaction is one which users settle transactions on the public blockchain. For instance, in the first couple years of its existence, Bitcoin users sent bitcoins to one another directly through the blockchain as there were no external intermediaries or custodians available. Over the past several years, transactions that occur off of the blockchain, on the edges, have become increasingly popular as it allows for faster clearing. Off-chain is the euphemism used to describe this activity. Hosted wallets, exchanges and many other services now exist to provide off-chain services and are managed by their own internal accounting records (e.g. exchanges perform buy/sell operations off the chain via their own private database).

Payment gateway: A payment gateway is an e-commerce application service provider service that authorizes credit card payments for e-businesses or online retailers. It is the equivalent of a physical point of sale terminal located in most retail outlets. (Source: Wikipedia.org)

A permissioned system is one in which identity for users is whitelisted (or blacklisted) through some type of KYB or KYC procedure; it is the common method of managing identity in traditional finance. In contrast, a permissionless system is one in which identity of participants is either pseudonomyous or even anonymous. Bitcoin was originally designed with permissionless parameters although as of this writing many of the on-ramps and off-ramps for Bitcoin are increasingly permission-based.

P2P: Peer-to-peer. Decentralized interactions that happen between at least two parties in a highly interconnected network. An alternative system to a ‘hub-and-spoke’ arrangement, in which all participants in a transaction deal with each other through a single mediation point.

Peer-to-peer lending (P2PL) – the lending of money to unrelated individuals, ‘peers’, outside of traditional financial intermediaries. Peer-to-peer or person-to-person lending is often abbreviated to ‘P2P’ lending and is the action of loaning money to individuals while avoiding the systems and processes put in place by traditional financial institutions. P2P lending is often central to the debate about the future of banking innovation. (Source: Sentronex)

Private key: An alphanumeric string kept secret by the user, and designed to sign a digital communication when hashed with a public key. In the case of bitcoin, this string is a private key designed to work with a public key. The public key is a bitcoin address.

Proof of stake: An alternative to proof of work, in which your existing stake in a currency (the amount of that currency that you hold) is used to calculate the amount of that currency that you can mine.

Proof of work: A system that ties mining capability to computational power. Blocks must be hashed, which is in itself an easy computational process, but an additional variable is added to the hashing process to make it more difficult. When a block is successfully hashed, the hashing must have taken some time and computational effort. Thus, a hashed block is considered proof of work.

Public key: An alphanumeric string which is publicly known, and which is hashed with another, privately held string to sign a digital communication. In the case of bitcoin, the public key is a bitcoin address.

Push payments – the giving of money that has implied consent; this could be cash payment or credit transfer.

Screen scraping is the process of collecting screen display data from one application and translating it so that another application can display it. This is normally done to capture data from a legacy application in order to display it using a more modern user interface. (Source: Techopedia.com)

Sharing economy: An economic model in which individuals are able to borrow or rent assets owned by someone else. The sharing economy model is most likely to be used when the price of a particular asset is high and the asset is not fully utilized all the time. (Source: Investopedia.com)

Single sign-on (SSO) is an authentication process that allows a user to access multiple application with one set of login credentials. SSO is a common procedure in enterprises, where a client accesses multiple resources connected to a local area network (LAN). (Source: Techopedia.com)

Software as a Service (SaaS) is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet. (Source: Techtarget.com)

Semantic Web – an extension of the current web, which aims to standardize the expression of relationships or meaning between web pages.

A smart contract is a simple rules engine; cryptographically assured business logic that has the ability to execute and move value. Smart contracts are computer protocols that facilitate, verify, execute and enforce the terms of a commercial agreement. Current proto-examples include some digital financial instruments used on electronic securities exchanges.

Smart property is property whose ownership is controlled via smart contracts that may or may not reside on a cryptoledger.

Social business – a business created and designed to address a social problem.

Structured databases – data that is fixed in terms of how it is stored, recorded, processed and accessed.

Supply chain finance (SCF) – optimizing the flow of money in and out of a business across a supply chain or to its customers, sometimes through invoice selling.

Trustless asset management refers to the ability to manage an asset such as a virtual token in a trustless manner – relying on mathematics, rather than a trusted 3rd party like a payment processor or a bank through the use of a cryptoledger.

Turing-complete is a math concept and for the purposes of this report relates to programmability. A Turing-complete programming language means that the language can be used to simulate any other computer language (not just its own) – it is a set of instructions that includes conditions, loops, and read/write memory. As an example, scripting language in Bitcoin is not Turing-complete because there are no loops. The original Bitcoin software implementation released in 2009 includes a scripting system called Script that it was intentionally not Turing-complete.

A Web portal is a specially designed website that often serves as the single point of access for information. A Web portal helps in search navigation, personalization, notification and information integration, and often provides features like task management, collaboration, business intelligence and application integration. Web portals are also known simply as portals. (Source: Techopedia.com)

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References

Consensus-as-a-service: a brief report on the emergence of permissioned, distributed ledger systems By Tim Swanson Published: April 6, 2015